TMI Blog1986 (4) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... (hereinafter referred to as the Company ) is a wholly owned subsidiary of Ambalal Sarabhai Enterprises Limited and carries on the business of pharmaceuticals, pigments and chemicals. The Second Respondent is the General Manager (Marketing) of the Company. The Appellant Union, S.G. Chemicals and Dyes Trading Employees' Union (hereinafter referred to as the Union ) is a trade union registered under the Trade Unions Act, 1926 (Act No. 16 of 1926) representing the employees of the Company. In 1984 the Company was operating in Bombay through three Divisions, namely, the Pharmaceuticals Division at Worli, the Laboratory and Dyes Division at Trombay and the Marketing and Sales Division at Express Building, Churchgate. The Registered Office of the Company was also situate in the same place as the Marketing Division, namely, in Express Building. Ambalal Sarabhai Enterprises Limited is also the owner of a chemicals and dyes factory called S.G. Chemicals and Dyes, situate at Ranoli in Baroda District in the state of Gujarat. By a notice dated July 16, 1984, given in Form XXIV-B prescribed by Rule 82-A of the Industrial Disputes (Bombay) Rules, 1957, the Company signing itself as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion at Churchgate with effect from September 17, 1984. The Company retained only six employees who, according to it, were to attend to the work consequent upon such closure. The Company did not pay to the eighty-four employees whose services were terminated any salary after September 17, 1984. According to its counter affidavit filed in reply to the Petition for Special Leave to Appeal, the Company has, however, offered to these eighty-four employees retrenchment compensation under section 25FFF of the Industrial Disputes Act aggregating to ₹ 22,02,670 and eighty-two out of these eighty-four employees have accepted such compensation aggregating to ₹ 22,00,162. The Union filed on October 8, 1984, before the Industrial Court Maharashtra, Bombay, a Complaint, being Complaint (ULP) No. 1273 of 1984, under section 28 of the Maharashtra Act read with Item 9 of Schedule IV thereto. The contention of the Union in the said Complaint was that the closure of the Churchgate Division was contrary to the provisions of section 25-O of the Industrial Disputes Act and, therefore, the employees continued to be in the service of the Company notwithstanding the said notice of closure a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and there does appear some functional integrality between the factory and the head office, but in my view, this fact is irrelevant in this complaint. The reason why the Industrial Court considered the functional integrality between the Trombay factory and the Churchgate office as irrelevant was that according to it before section 25-O could apply, the number of workmen employed in an industrial establishment as defined by section 25-L of the Industrial Disputes Act should not be less than one hundred and that admittedly at no time had the number of workmen at the Trombay Factory been one hundred or more. The Industrial Court further held that the Churchgate office was not in legal parlance a part of the Trombay factory and the Company was not bound to follow the procedure prescribed by section 25-O for by no stretch of imagination could the Churchgate Division be held to be an undertaking of an industrial establishment within the meaning of Chapter V-B of the Industrial Disputes Act. The Industrial Court also held that the Head Office of the Company located at Churchgate was governed by the Bombay Shops and Establishments Act, 1948 (Bombay Act No. 79 of 1948) while the esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e employees through the Union to come to this Court in appeal against the order of the High Court. When we consider that here are eighty-four workmen who have been thrown out of employment and can ill- afford the luxury of fighting from court to court and that some of the questions arising in the case are of considerable importance both to the employers and the employees, the reason given for directly coming to this Court must be held to be valid and this must be considered to be a fit case for this Court to exercise its discretion and grant Special Leave to Appeal. Turning now to the merits of this Appeal, the first question which falls to be considered is whether section 25- 0 of the Industrial Disputes Act applied to the closure of the Churchgate Office. According to the Union, the case was governed by section 25-O while according to the Company, it was section 25FFA which applied to the case. Under section 25FFA(1), an employer who intends to close down an undertaking is to give, at least sixty days before the date on which the intended closure is to become effective, a notice in the prescribed manner to the appropriate Government stating clearly the reasons for the intended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lished in the Gazette of India Extraordinary, Part II, Section 3(ii), dated August 18, 1984, at page 2, the whole of the Amendment Act, 1984, was brought into force with effect from August 18, 1984. By Ministry of Labour and Rehabilitation (Department of Labour) Notification No. S.O. 606(E), dated August 21, 1984, published in the Gazette of India Extraordinary, Part II, Section 3(ii) dated August 21, 1984, at page 2, several sections of the Amendment Act, 1982, including section 14 which substituted section 25-O of the Industrial Disputes Act, were brought into force on August 21, 1984. Sub-section (1) of section 25-O as substituted provides as follows : 25-O. Procedure for closing down an undertaking.- (1) An employer who intends to close down an undertaking of an industrial establishment to which this Chapter applies shall, in the prescribed manner, apply, for prior. permission at least ninety days before the date on which the intended closure is to become effective, to the appropriate Government, stating clearly the reasons for the intended closure of the undertaking and a copy of such application shall also be served simultaneously on the representatives of the workmen in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter shall apply to an industrial establishment (not being an establishment of a seasonal character or in which work is performed only Intermittently) in which not less than one hundred workmen were employed on an average per working day for the preceding twelve months. The words one hundred were substituted for the words three hundred in section 25K by section 12 of the Amendment Act, 1982, which section was also brought into force on August 21, 1984. Section 25L defines the expression industrial establishment for the purposes of Chapter V-B and is in the following terms : 25L. Definitions. - For the purposes of this Chapter, - (a) 'industrial establishment' means - (i) a factory as defined in clause (m) of section 2 of the Factories Act. 1948; (ii) a mine as defined in clause (j) of sub- section (1) of section 2 of the Mines Act, 1952; or (iii) a plantation as defined in clause (f) of section 2 of the Plantations Labour Act, 1951; (b) notwithstanding anything contained in sub- clause (ii) of clause (a) of section 2, - (i) in relation to any company in which not less than fifty-one per cent of the paid-up share capital is held by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raft, or industrial occupation or avocation of workmen . By clause (c) of section 2 of the Amendment Act, 1982, the definition of industry given in clause (j) of section 2 of the Industrial Disputes Act was substituted. Clause (c) of section 2 of the Amendment Act, 1982, does not, however, appear to have been brought into force yet and in any event was not in force when the Company gave the notice of closure as also when it closed down its Churchgate Division. It is, therefore, unnecessary to reproduce the definition of industry as substituted by the Amendment Act, 1982. At the date when the Company gave the notice of closure, namely, on July 16, 1984, the section in force was section 25-0 as originally enacted by the Industrial Disputes (Amendment) Act, 1976. In the case of the State of Maharashtra the original section 25-0 was substituted by a new section by the Industrial Disputes (Maharashtra Amendment) Ordinance, 1981 (Maharashtra Ordinance No. 16 of 1981), which Ordinance was repealed by the Industrial Disputes (Maharashtra Amendment) Act, 1981 (Maharashtra Act No. 3 of 1982). The said Act came into force with retrospective effect on October 27, 1981, namely, the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Amendment Act, 1982. The parties have also gone to trial on the footing that the requirement under section 25-K was not of less than one hundred workmen . The Trombay factory of the Company carries on the work of manufacturing and processing dyes. It is not disputed that the Trombay factory is an industry within the meaning of that term as defined in clause (j) of section 2 of the Industrial Disputes Act. It is also not disputed that the Trombay factory is a factory as defined by clause (m) of section 2 of the Factories Act and is, therefore, an industrial establishment within the meaning of that expression as defined in section 25L of the Industrial Disputes Act. What was, however, disputed was that the Trombay Factory is an industrial establishment to which Chapter V-B applies because at no time did it employ one hundred workmen. It was also disputed that the Churchgate Division of the Company was an undertaking of an industrial establishment inasmuch as the Chruchgate Division was not a factory within the meaning of clause (m) of the Factories Act. The Company's contentions in that behalf found favour with the Industrial Court. It is not possible to accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ps or vessels ; or (vi) preserving or storing any article in cold storage . (Emphasis supplied) Thus, the different processes set out in sub-clause (i) of clause (k) of section 2 must be with a view to the use, sale, manufactured. In the modern industrial world it is often not possible for all processes which ultimately result in the finished product to be carried out at one place and by reason of the complexity and number of such processes and the acute shortage of accommodation in many cities, several of these processes are often carried out in different buildings situate at different places. Further, in many cases these functions are distributed amongst different departments and divisions of a factory and such departments and divisions are housed in different buildings. That a factory can be housed in more than one building is also clear from section 4 of the Factories Act which provides as follows : 4. Power to declare different departments to be separate factories or two or more factories to be a single factory. - The State Government may, on an application made in this behalf by an occupier, direct, by an order in writing, that for all or any of the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end, a demand was made on behalf of the workers of the factory who had been laid-off during the strike, for payment of lay- off compensation under section 25-C of the Industrial Disputes Act, but the management refused the demand relying on clause (iii) of section 25E. The Industrial Tribunal took the view that the limestone quarry was not part of the establishment of the cement factory and that the workmen in the factory were not disentitled to lay-off compensation by reason of clause (iii) of section 25E. The company's appeal was allowed by this Court. On behalf of the workmen the Explanation to section 25A was relied upon. With reference to the said Explanation, this Court said (at pages 715-16) : The Explanation only gives the meaning of the expression 'industrial establishment' for certain sections of the Act; it does not purport to lay down any test as to what constitutes one 'establishment'. Let us take, for example, a factory which has different departments in which manufacturing processes are carried on with the aid of power. Each department, if it employs ten or more workmen, is a factory within the meaning of cl.(m) of s.2 of the Factories Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Steel Limited v. The Workmen Ors., [1973] 3 S.C.R. 303. In that case, this Court held (at page 310) : The word undertaking as used in s. 25FFF seems to us to have been used in its ordinary sense connoting thereby any work, enterprise, project or business undertaking. It is not intended to cover the entire industry or business of the employer as was suggested on behalf of the respondent. Even closure or stoppage of a part of the business or activities of the employer would seem in law to be covered by this sub-section. The question has indeed to be decided on the facts of each case. The above passage was cited with approval and reiterated in Workmen of the Straw Board Manufacturing Company Limited v. M/s. Straw Board Manufacturing Company Limited, [1974] 3 S.C.R. 703, 719. It is thus clear that the word undertaking in the expressions an undertaking of an industrial establishment in section 25-0 means an undertaking in its ordinary meaning and sense as defined by this Court in the case of Hindustan Steel Limited. If an undertaking in its ordinary meaning and sense is a part of an industrial establishment so that both taken together constitute one establishment, secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atch Co. Ltd. v. Their Workmen, [1964] 3 S.C.R. 560; s.c. [1963] 2 Lab. L.J. 459 and Workmen of the Straw Board Manufacturing Company Limited v. M/s. Straw Board Manufacturing Company Limited. In Western India Match Company's case the Court held on the facts that there was functional integrality and interdependence or community of financial control and management of the sales office and the factory in the appellant company and that the two must be considered part of one and the same unit of industrial production. In the Straw Board Manufacturing Company's case the Court held (at page 713) : The most important aspect in this particular case relating to closure, in our opinion, is whether one unit has such componental relation that closing of One must lead to the closing of the other or the one cannot reasonably exist without the other.Functional integrality will assume an added significance in a case of closure of a branch or unit. What now falls to be ascertained is whether the undertaking of the Company, namely, the Churchgate Division, formed part of the industrial establishment of the Company, namely, the Trombay factory, so as to constitute the Trombay factory a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, leave travel allowance, statutory deductions such as for provident fund, income-tax, professional tax, etc., in respect of the workmen working at the Trombay factory was also done in the Churchgate Division and an employee from the Churchgate Division used to go to the Trombay factory on the last day of each month for actually making payment of the salaries etc. The work of purchasing statutory items, printing forms, etc., for the Trombay factory and the Worli Division was also done by the Churchgate Division and the maintenance of the Express Building at Churchgate and of the factory at Trombay was done by personnel in the Churchgate Division. The Churchgate Division also purchased uniforms, rain coats and umbrellas for the workmen working in the Trombay factory in addition to the workmen working in the Express Building. The services of the workmen working in the Trombay factory were transferable and workmen were in fact transferred from the Trombay factory to the Churchgate Division. While the Union examined eight witnesses, P.S. Raman, Executive (Administration) of the Company was the only witness examined by the Company. Raman has admitted in his evidence that the marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted one establishment. me fact that, according to the Company, a major part of the work of the Churchgate Division was that of marketing and selling the products of the Ranoli factory belonging to Ambalal Sarabhai Enterprises Limited is irrelevant. m e Trombay factory could not have conveniently existed and functioned without the Churchgate Division and the evidence shows a complete functional integrality between the Trombay factory and the Churchgate Division of the Company. The total number of workmen employed at the relevant time in the Trombay factory and the Churchgate Division was one hundred and fifty and, therefore, if the Company wanted to close down its Churchgate Division, the section of the Industrial Disputes Act which applied was section 25-O and not section 25FFA. The next contention raised on behalf of the Company was that the Trombay factory was registered under the Factories Act while the Churchgate Division was registered as a commercial establishment under the Bombay Shops and Establishments Act and, therefore, they could not be treated as one. According to the Industrial Court, this fact of registration under two different Acts constituted the Trombay facto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent or entertainment to which this Act applies and includes such other establishment as the State Government may, by notification in the Official Gazette, declare to be an establishment for the purposes of this Act . It will be noticed that the word factory does not occur in the definition of establishment while a factory is expressly excluded from the definition of commercial establishment . The reason is obvious. mere are separate Chapters in the Bombay Shops and Establishment Act which provide for various matters such as opening and closing hours, daily and weekly hours of work, interval for rest, holidays in a week, etc., in respect of different categories of establishment, such as shops and commercial establishments, residential hotels and restaurants and eating houses and theatres or other places of public amusement or entertainment. Under section 7(1) of the said Act, the employer of every establishment is to send to the Inspector of the local area concerned a statement in a prescribed form together with the prescribed fees containing various particulars including the category of the establishment, i.e., whether it is a shop, commercial establishment, residential ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess is carried on with the aid of power (Entry 54); such establishments manufacturing bricks as open earlier than 5.30 a.m. (Entry 96); establishment of Jayems Chemicals, Nashik Road, Deolali, Nashik (Entry 106); Biotech Laboratories, Poona (Entry 160); employees in Messrs. Manganese Ore (India) Ltd., Nagpur (Entry 183); employees in tanneries and leather manufactory (Entry 187); ILAC Limited, Calico Chemicals Plastics and Fibres Division Premises, Anik Chembur, Bombay - 400074 (Entry 208); flour mills in Greater Bombay (Entry 220); and Trombay Thermal Power Station Construction Project, Unit 5, of the Tata Power Company Ltd., Bombay (Entry 243). It may be mentioned that while the laboratory of the Company was located in the Express Building before it was shifted to the Trombay factory, it was registered under the Bombay Shops and Establishments Act and not under the Factories Act. The error made by the Industrial Court was in considering that an undertaking of an industrial establishment should itself be an industrial establishment, that is, a factory as defined in clause (m) of section 2 of the Factories Act. This supposition is not correct for, as already pointed out, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be expressly stated in any contract. If the services of a workman are terminated in violation of any of the provisions of the Industrial Disputes Act, such termination is unlawful and ineffective and the workman would ordinarily be entitled to reinstatement and payment of full back wages. In the present case, there was a Settlement arrived at between the Company and the Union under which certain wages were to be paid by the Company to its workmen. The Company failed to pay such wages from September 18, 1984, to the eighty-four workmen whose services were terminated on the ground that it had closed down its Churchgate Division. As already held, the closing down of the Churchgate Division was illegal as it was in contravention of the provisions of section 25-0 of the Industrial Disputes Act. Under sub-section (6) of section 25-0, where no application for permission under sub-section (1) of section 25-0 is made, the closure of the undertaking is to be deemed to be illegal from the date of the closure and the workmen are to be entitled to all the benefits under any law for the time being in force, as if the undertaking had not been closed down. The eigty-four workmen were, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after there is still any balance of retrenchment compensation remaining to be adjusted, it would be too harsh to direct that such workmen should continue in service and work for the Company without receiving any salary until the balance of the retrenchment compensation stands fully adjusted; and, therefore, so far as future salary is concerned, only a part of it can be directed to be adjusted against the balance of the retrenchment compensation, provided there is any such balance left after setting off the back wages. In the result, this Appeal must succeed and is allowed and the order dated July 26, 1985, passed by the Industrial Court, Maharashtra, Bombay, dismissing the Complaint (ULP) No. 1273 of 1984 filed by the Appellant Union against the Respondents is set aside and the said Complaint is allowed and it is declared that the closure of the Churchgate Division of S.G. Chemicals and Dyes Trading Limited was illegal and the workmen whose services were terminated on account of such illegal closure continued and are continuing in the employment of the Company on and from September 18, 1984, and are entitled to receive from the Company their full salary and all other benefits un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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